Friday, November 5, 2004

Federated forecast rosier

Major retailers trend to improved profitability

The Enquirer
and Bloomberg News

Federated Department Stores on Thursday raised its profit forecast for the third quarter by as much as 10 cents a share, despite lackluster sales for the period due to hurricanes in Florida, among other factors.

The Cincinnati-based parent of Macy's, Bloomingdale's and Lazarus-Macy's made its report on the same day that most U.S. retailers reported strong results for October.

Federated now expects to report quarterly profit of 38 to 40 cents on Wednesday - up from its prior guidance of 30 to 32 cents a share - even though total sales for the period rose only 0.2 percent.

The company's news came on the same day as a broad rally on Wall Street touched off by falling oil prices and the re-election of President Bush. The Standard & Poor's 500 Index Thursday hit its highest level since March 2002.

Federated, Gap Inc. and J.C. Penney Co. led gains among retailers after the companies said third-quarter earnings will exceed forecasts.

Analysts had been expecting third-quarter earnings of 32 cents a share; that was the average estimate of analysts polled by Thomson First Call.

Shares in Federated closed Thursday at $52.62, up $2.76 or 5.5 percent.

In addition, Federated said October sales at stores open at least one year, or same-store sales, rose 4 percent - beating analyst expectations for a 2.6 percent increase. Total sales for the four weeks ended Oct. 30 increased 3.8 percent to $1.098 billion, compared to total sales of $1.057 billion in the same period last year.

Indeed, sales at most U.S. retailers signaled sustained growth in the face of record energy prices.

Stores open at least a year gained the most in five months, according to New York-based International Council of Shopping Centers, based on results from 75 chains.

Wal-Mart said sales increased 2.8 percent, the third consecutive month under 3 percent, as gasoline prices surged 28 percent and crimped spending.

U.S. temperatures cooled, boosting sales of warmer clothing at retailers including Target Corp. and American Eagle Outfitters. Sales during the holidays in November and December will rise 3 percent to 4 percent, the ICSC forecasts, in line with last year's results.

"We're seeing some traction in the industry going into the holiday season," ICSC economist Michael Niemira said. "You like to see some kind of firming in the underlying demand."

Terry J. Lundgren, Federated's chairman, president and chief executive officer, attributed Federated's stronger-than-anticipated performance in October to an improving overall sales trend, as well as a post-hurricane sales rebound in Florida.

For the year to date, Federated's sales totaled $10.557 billion, up 3.4 percent from total sales of $10.211 billion in the first three quarters of 2003. Same-store sales also were up 3.4 percent.

For the fourth quarter, Federated continues to expect same-store sales to increase 1.5 to 3 percent, with earnings of $2.45 to $2.55 a share. Lundgren said Federated is anticipating that November same-store sales will be flat to up 2 percent, while December will benefit from having two extra pre-Christmas shopping days this year, resulting in an anticipated same-store sales increase of 1 to 3 percent.

Federated has annual sales of more than $15.2 billion. Federated operates more than 450 stores in 34 states, Guam and Puerto Rico.

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